Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2022 | Oct. 28, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2022 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 001-31972 | |
Entity Registrant Name | TELKONET, INC. | |
Entity Central Index Key | 0001094084 | |
Entity Tax Identification Number | 87-0627421 | |
Entity Incorporation, State or Country Code | UT | |
Entity Address, Address Line One | 20800 Swenson Drive | |
Entity Address, Address Line Two | Suite 175 | |
Entity Address, City or Town | Waukesha | |
Entity Address, State or Province | WI | |
Entity Address, Postal Zip Code | 53186 | |
City Area Code | (414) | |
Local Phone Number | 302-2299 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 299,212,282 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 3,721,024 | $ 2,361,059 |
Accounts receivable, net | 1,939,676 | 1,010,554 |
Inventories, net | 1,408,442 | 825,559 |
Contract assets | 27,579 | 266,014 |
Prepaid expenses | 316,754 | 735,092 |
Total current assets | 7,413,475 | 5,198,278 |
Property and equipment, net | 137,879 | 84,201 |
Other assets: | ||
Deposits | 4,595 | 7,595 |
Operating lease right of use assets | 474,831 | 570,512 |
Total other assets | 479,426 | 578,107 |
Total Assets | 8,030,780 | 5,860,586 |
Current liabilities: | ||
Accounts payable | 628,604 | 1,865,535 |
Accrued liabilities | 898,538 | 718,721 |
Line of credit | 0 | 403,089 |
Contract liabilities - current | 940,056 | 800,965 |
Lease Liabilities - current | 153,276 | 195,176 |
Income taxes payable | 3,599 | 5,431 |
Total current liabilities | 2,624,073 | 3,988,917 |
Long-term liabilities: | ||
Lease liabilities | 391,680 | 459,668 |
Contract liabilities - long term | 79,301 | 140,265 |
Accrued royalties - long-term | 255,000 | 360,000 |
Total long-term liabilities | 725,981 | 959,933 |
Total liabilities | 3,350,054 | 4,948,850 |
Stockholders’ Equity | ||
Common Stock, par value $.001 per share; 475,000,000 shares authorized; 299,212,282 and 136,311,335 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively. | 299,212 | 136,311 |
Additional paid-in-capital | 132,583,520 | 127,740,976 |
Accumulated deficit | (129,874,830) | (128,668,176) |
Total stockholders’ equity | 4,680,726 | 911,736 |
Total Liabilities and Stockholders’ Equity | 8,030,780 | 5,860,586 |
Series A Preferred Stock [Member] | ||
Stockholders’ Equity | ||
Preferred Stock, Value, Issued | 1,310,765 | 1,340,566 |
Series B Preferred Stock [Member] | ||
Stockholders’ Equity | ||
Preferred Stock, Value, Issued | $ 362,059 | $ 362,059 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 475,000,000 | 475,000,000 |
Common stock, shares issued | 299,212,282 | 136,311,335 |
Common stock, shares outstanding | 299,212,282 | 136,311,335 |
Series A Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 215 | 215 |
Preferred Stock, Shares Outstanding | 181 | 185 |
Preferred stock, liquidiation preference | $ 1,837,198 | $ 1,822,450 |
Series B Preferred Stock [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 567 | 567 |
Preferred Stock, Shares Outstanding | 52 | 52 |
Preferred stock, liquidiation preference | $ 513,179 | $ 497,605 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Total Net Revenues | $ 2,017,334 | $ 1,454,068 | $ 6,106,409 | $ 4,603,766 |
Total Cost of Sales | 1,404,264 | 865,519 | 3,143,075 | 2,201,454 |
Gross Profit | 613,070 | 588,549 | 2,963,334 | 2,402,312 |
Operating Expenses: | ||||
Research and development | 272,144 | 268,917 | 798,913 | 876,778 |
Selling, general and administrative | 1,026,023 | 1,200,569 | 3,310,127 | 3,362,761 |
Depreciation and amortization | 8,702 | 10,346 | 31,129 | 33,935 |
Total Operating Expenses | 1,306,869 | 1,479,832 | 4,140,169 | 4,273,474 |
Operating Profit / (Loss) | (693,799) | (891,283) | (1,176,835) | (1,871,162) |
Other Income / (Expenses): | ||||
Gain / (Loss) on Debt Extinguishment | 0 | 916,107 | 0 | 1,836,780 |
Gain / (Loss) on Fixed Assets Disposal | (70) | 0 | (526) | 0 |
Interest expense, net | (2,735) | (7,584) | (21,940) | (19,286) |
Total Other Income / (Expenses): | (2,805) | 908,523 | (22,466) | 1,817,494 |
Income (Loss) before Provision for Income Taxes | (696,604) | 17,240 | (1,199,301) | (53,668) |
Income Tax Provision /(Benefit) | 968 | 0 | 7,353 | 1,948 |
Net Income (Loss) | $ (697,572) | $ 17,240 | $ (1,206,654) | $ (55,616) |
Basic – net income (loss) attributable to common stockholders | $ 0 | $ 0 | $ 0 | $ 0 |
Diluted – net income (loss) attributable to common stockholders | $ 0 | $ 0 | $ 0 | $ 0 |
Weighted Average Common Shares Outstanding – basic | 299,212,282 | 136,311,335 | 295,592,261 | 136,311,335 |
Weighted Average Common Shares Outstanding – diluted | 299,212,282 | 136,311,335 | 295,592,261 | 136,311,335 |
Product [Member] | ||||
Total Net Revenues | $ 1,828,954 | $ 1,290,389 | $ 5,570,775 | $ 4,071,159 |
Total Cost of Sales | 1,371,312 | 851,873 | 3,049,048 | 2,164,586 |
Recurring [Member] | ||||
Total Net Revenues | 188,380 | 163,679 | 535,634 | 532,607 |
Total Cost of Sales | $ 32,952 | $ 13,646 | $ 94,027 | $ 36,868 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) | Preferred Stock Series A [Member] | Preferred Stock Series B [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at Dec. 31, 2020 | $ 1,340,566 | $ 362,059 | $ 136,311 | $ 127,733,714 | $ (128,255,391) | $ 1,317,259 |
Shares, Outstanding, Beginning Balance at Dec. 31, 2020 | 185 | 52 | 136,311,335 | |||
Stock-based compensation expense related to employee stock options | 1,815 | 1,815 | ||||
Net profit attributable to common stockholders | 82,739 | 82,739 | ||||
Ending balance, value at Mar. 31, 2021 | $ 1,340,566 | $ 362,059 | $ 136,311 | 127,735,529 | (128,172,652) | 1,401,813 |
Shares, Outstanding, Ending Balance at Mar. 31, 2021 | 185 | 52 | 136,311,335 | |||
Beginning balance, value at Dec. 31, 2020 | $ 1,340,566 | $ 362,059 | $ 136,311 | 127,733,714 | (128,255,391) | 1,317,259 |
Shares, Outstanding, Beginning Balance at Dec. 31, 2020 | 185 | 52 | 136,311,335 | |||
Net profit attributable to common stockholders | (55,616) | |||||
Ending balance, value at Sep. 30, 2021 | $ 1,340,566 | $ 362,059 | $ 136,311 | 127,739,160 | (128,311,007) | 1,267,089 |
Shares, Outstanding, Ending Balance at Sep. 30, 2021 | 185 | 52 | 136,311,335 | |||
Beginning balance, value at Mar. 31, 2021 | $ 1,340,566 | $ 362,059 | $ 136,311 | 127,735,529 | (128,172,652) | 1,401,813 |
Shares, Outstanding, Beginning Balance at Mar. 31, 2021 | 185 | 52 | 136,311,335 | |||
Stock-based compensation expense related to employee stock options | 1,816 | 1,816 | ||||
Net profit attributable to common stockholders | (155,595) | (155,595) | ||||
Ending balance, value at Jun. 30, 2021 | $ 1,340,566 | $ 362,059 | $ 136,311 | 127,737,345 | (128,328,247) | 1,248,034 |
Shares, Outstanding, Ending Balance at Jun. 30, 2021 | 185 | 52 | 136,311,335 | |||
Stock-based compensation expense related to employee stock options | 1,815 | 1,815 | ||||
Net profit attributable to common stockholders | 17,240 | 17,240 | ||||
Ending balance, value at Sep. 30, 2021 | $ 1,340,566 | $ 362,059 | $ 136,311 | 127,739,160 | (128,311,007) | 1,267,089 |
Shares, Outstanding, Ending Balance at Sep. 30, 2021 | 185 | 52 | 136,311,335 | |||
Beginning balance, value at Dec. 31, 2021 | $ 1,340,566 | $ 362,059 | $ 136,311 | 127,740,976 | (128,668,176) | 911,736 |
Shares, Outstanding, Beginning Balance at Dec. 31, 2021 | 185 | 52 | 136,311,335 | |||
Stock and warrants issued in VDA Transaction | $ 162,901 | 4,837,099 | 5,000,000 | |||
Stock And Warrants Issued In VDA Transaction Shares | 162,900,947 | |||||
Shares cancelled per severance agreement | $ (29,801) | (29,801) | ||||
Shares cancelled per severance agreement, Shares | (4) | |||||
Stock-based compensation expense related to employee stock options | 1,815 | 1,815 | ||||
Net profit attributable to common stockholders | (517,828) | (517,828) | ||||
Ending balance, value at Mar. 31, 2022 | $ 1,310,765 | $ 362,059 | $ 299,212 | 132,579,890 | (129,186,004) | 5,365,922 |
Shares, Outstanding, Ending Balance at Mar. 31, 2022 | 181 | 52 | 299,212,282 | |||
Beginning balance, value at Dec. 31, 2021 | $ 1,340,566 | $ 362,059 | $ 136,311 | 127,740,976 | (128,668,176) | 911,736 |
Shares, Outstanding, Beginning Balance at Dec. 31, 2021 | 185 | 52 | 136,311,335 | |||
Net profit attributable to common stockholders | (1,206,654) | |||||
Ending balance, value at Sep. 30, 2022 | $ 1,310,765 | $ 362,059 | $ 299,212 | 132,583,520 | (129,874,830) | 4,680,726 |
Shares, Outstanding, Ending Balance at Sep. 30, 2022 | 181 | 52 | 299,212,282 | |||
Beginning balance, value at Mar. 31, 2022 | $ 1,310,765 | $ 362,059 | $ 299,212 | 132,579,890 | (129,186,004) | 5,365,922 |
Shares, Outstanding, Beginning Balance at Mar. 31, 2022 | 181 | 52 | 299,212,282 | |||
Stock-based compensation expense related to employee stock options | 1,815 | 1,815 | ||||
Net profit attributable to common stockholders | 8,746 | 8,746 | ||||
Ending balance, value at Jun. 30, 2022 | $ 1,310,765 | $ 362,059 | $ 299,212 | 132,581,705 | (129,177,258) | 5,376,483 |
Shares, Outstanding, Ending Balance at Jun. 30, 2022 | 181 | 52 | 299,212,282 | |||
Stock-based compensation expense related to employee stock options | 1,815 | 1,815 | ||||
Net profit attributable to common stockholders | (697,572) | (697,572) | ||||
Ending balance, value at Sep. 30, 2022 | $ 1,310,765 | $ 362,059 | $ 299,212 | $ 132,583,520 | $ (129,874,830) | $ 4,680,726 |
Shares, Outstanding, Ending Balance at Sep. 30, 2022 | 181 | 52 | 299,212,282 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (1,206,654) | $ (55,616) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Stock-based compensation expense related to employee stock options | 5,445 | 5,446 |
Depreciation and amortization | 31,129 | 33,935 |
Loss / (gain) on fixed asset disposal | 526 | 0 |
Noncash operating lease expense (ROU) | 95,681 | 172,161 |
Gain on debt extinguishment | 0 | (1,836,780) |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (929,122) | 6,758 |
Inventories, net | (582,883) | 533,648 |
Prepaid expenses | 418,338 | (474,370) |
Deposits | 3,000 | 0 |
Accounts payable | (1,236,931) | 84,733 |
Accrued royalties - long-term | (105,000) | (105,000) |
Accrued liabilities | 179,817 | 235,124 |
Contract liabilities | 78,127 | 232,825 |
Contract assets | 238,435 | (76,772) |
Operating lease liabilities | (109,888) | (180,134) |
Accrued income tax payable | (1,832) | 7,509 |
Income taxes receivable | 0 | 105,745 |
Net Cash Used In Operating Activities | (3,121,812) | (1,310,788) |
Cash Flows From Investing Activities: | ||
Payments for Property & Equipment | (86,633) | 0 |
Proceeds from sale of fixed assets | 1,300 | 0 |
Net Cash Used in Investing Activities | (85,333) | 0 |
Cash Flows From Financing Activities: | ||
Proceeds from Note Payable | 0 | 913,063 |
Proceeds from stock and warrants issued in VDA Transaction | 5,000,000 | 0 |
Repurchase of employee-owned Class A shares | (29,801) | 0 |
Proceeds from line of credit | 4,434,152 | 5,357,000 |
Payments on line of credit | (4,837,241) | (5,357,996) |
Net Cash Provided By Financing Activities | 4,567,110 | 912,067 |
Net increase/(decrease) in cash and cash equivalents | 1,359,965 | (398,721) |
Cash and cash equivalents at the beginning of the period | 2,361,059 | 3,011,811 |
Cash and cash equivalents at the end of the period | 3,721,024 | 2,613,090 |
Cash transactions: | ||
Cash paid during the period for interest | $ 21,940 | $ 18,643 |
BASIS OF PRESENTATION AND SIGNI
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | NOTE A – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies applied in the preparation of the accompanying unaudited condensed consolidated financial statements follows. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Telkonet, Inc. (the “Company” or “Telkonet”) have been prepared in accordance with Rule S-X of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. However, the results from operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated December 31, 2021 financial statements and footnotes thereto included in the Company's Form 10-K filed with the SEC. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Telkonet Communications, Inc., operating as a single reportable business segment. Business Telkonet, Inc. (“we,” “us,” “our,” the “Company,” or “Telkonet”), formed in 1999 and incorporated under the laws of the state of Utah, is the creator of the EcoSmart and the Rhapsody Platforms of intelligent automation solutions designed to optimize energy efficiency, comfort and analytics in support of the emerging Internet of Things (“IoT”). The platforms are deployed primarily in the hospitality, educational, governmental and other commercial markets, and is specified by engineers, HVAC professionals, building owners, and building operators. We currently operate in a single reportable business segment. In 2007, the Company acquired substantially all of the assets of Smart Systems International (“SSI”), which was a provider of energy management products and solutions to customers in the United States and Canada and the precursor to the Company’s EcoSmart Platform. In 2020, the Company launched the Rhapsody Platform, which simplifies the installation and setup of the Company’s newest products and integrations. Both platforms provide comprehensive savings, management reporting, analytics and virtual engineering of a customer’s portfolio and/or property’s room-by-room energy consumption. Telkonet has deployed more than a half million intelligent devices worldwide in properties within the hospitality, educational, governmental and other commercial markets. The platforms are recognized as solutions for reducing energy consumption, operational costs and carbon footprints, and eliminating the need for new energy generation in these marketplaces – all whilst improving occupant comfort and convenience. On August 6, 2021, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with VDA Group S.p.A., an Italian joint stock company (“VDA”), pursuant to which VDA would, at the Closing (as defined in the Purchase Agreement), contribute $ 5 million 162,900,947 105,380,666 Following the issuance of 162,900,947 shares of the Company’s common stock to VDA upon the Closing, VDA owns 53% of the issued and outstanding common stock on a fully diluted as exercised/converted basis, resulting in a change of control of the Company. VDA could eventually own as much as 65% of the issued and outstanding common stock on a fully diluted as exercised/converted basis if it fully exercises the Warrant. The Company has elected not to apply pushdown accounting adjustments to the Company’s financial statements related to the change in control as allowed by Accounting Standards Update No. 2014-17. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, the Company evaluates significant estimates used in preparing its consolidated financial statements including those related to revenue recognition and allowances for uncollectible accounts receivable, inventory obsolescence, recovery of long-lived assets, income tax provisions and related valuation allowance, stock-based compensation, and contingencies. The Company bases its estimates on historical experience, underlying run rates and various other assumptions that the Company believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates. The following critical judgments, assumptions, and estimates used in the preparation of the consolidated financial statements are summarized below. Please refer to our most recent Form 10-K filed with the SEC for a more in-depth analysis of such policies. Revenue from Contracts with Customers Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606, the Standard”) supersedes nearly all legacy revenue recognition guidance. ASC 606, the Standard outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue based on when it satisfies its performance obligations by transferring control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for said goods or services, as follows: i) Identify the customer contracts The Company accounts for a customer contract under ASC 606 when the contract is legally enforceable. A contract is legally enforceable when all of the following criteria are met: (1) the contract has been approved by the Company and the customer and both parties are committed to perform their respective obligations, (2) the Company can identify each party’s rights regarding goods or services transferred, (3) the Company can identify payment terms for goods or services transferred, (4) the contract has commercial substance, and (5) collectability of all the consideration to which the Company is entitled in exchange for the goods or services transferred is probable. A contract does not exist if each party to the contract has the unilateral right to terminate a wholly unperformed contract without compensating the other party (or parties). Nearly all of the Company’s contracts do not contain such mutual termination rights for convenience. All contracts are in written form. ii) Identify the performance obligations The Company will enter into product only contracts that contain a single performance obligation related to the transfer of products to a customer. The Company will also enter into certain customer contracts that encompass product and installation services, referred to as “turnkey” solutions. These contracts ultimately provide the customer with a solution that enhances the functionality of the customer’s existing equipment. For this reason, the Company has determined that the product and installation services are not separately identifiable performance obligations, but in essence represent one, combined performance obligation. The Company also offers post-installation support services to customers. Support services are considered a separate performance obligation. iii) Determine the transaction price The Company generally enters into contracts containing fixed prices. It is not customary for the Company to include contract terms that would result in variable consideration. In the rare situation that a contract does include this type of provision, it is not expected to result in a material adjustment to the transaction price. The Company regularly extends pricing discounts; however, they are negotiated up front and adjust the fixed transaction price set out in the contract. Customer contracts will typically contain upfront deposits that will be applied against future invoices, as well as customer retainage. The intent of any required deposit or retainage is to ensure that the obligations of either party are honored and follow customary industry practices. In addition, the Company will typically be paid in advance at the beginning of any support contracts, consistent with industry practices. None of these payment provisions are intended to represent significant implicit financing. The Company’s standard payment terms are thirty days from invoice date. Products are fully refundable when returned in their original packaging without damage or defacing less a restocking fee. Historical returns have shown to be immaterial. The Company offers a standard one-year assurance warranty. However customers can purchase an extended warranty. Under the revenue standard, extended warranties are accounted for as a service warranty, requiring the revenue to be recognized over the extended service periods. Contracts involving an extended warranty are immaterial and will continue to be combined with support revenue and recognized on a straight-line basis over the support revenue term. iv) Allocate the transaction price to the performance obligations Revenues from customer contracts are allocated to the separate performance obligations based on their relative stand-alone selling price (“SSP”) at contract inception. The SSP is the price at which the Company would sell a promised good or service separately. The best evidence of an SSP is the observable price of a good or service when the entity sells that good or service separately in similar circumstances and to similar customers. However, turnkey solutions are sold for a broad range of amounts resulting from, but not limited to, tiered discounting for value added resellers based upon committed volumes and other economic factors. Due to the high variability of our pricing, the Company cannot establish a reliable SSP using observable data. Accordingly, the Company uses the residual approach to allocate the transaction price to performance obligations related to its turnkey solutions. When support services are not included within the turnkey solution, the residual method is not utilized and no allocation of the transaction price to the performance obligation is necessary. All support service agreements, whether single or multi-year terms, automatically renew for one-year terms at a suggested retail price (“SRP”), unless terminated by either party. Support service renewals are consistently priced and therefore would support the use of SRP as the best estimate of an SSP for such performance obligations. v) Revenue Recognition The Company recognizes revenues from product only sales at a point in time when control over the product has transferred to the customer. As the Company’s principal terms of sale are FOB shipping point, the Company primarily transfers control and records revenue for product only sales upon shipment. Contract Fulfillment Cost The Company recognizes related costs of the contract over time in relation to the revenue recognition. Costs included within the projects relate to the cost of material, direct labor and costs of outside services utilized to complete projects. These are presented as “Contract assets” in the Condensed Consolidated Balance Sheet. Advertising The Company follows the policy of charging the costs of advertising to expenses as incurred. The Company incurred $ 0 2,751 3,402 5,725 Research and Development The Company accounts for research and development costs in accordance with the ASC 730-10, “Research and Development”. Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. Total expenditures on research and product development for the three months ended September 30, 2022 and 2021 were $ 272,144 268,917 798,913 876,778 Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms. The Company records allowances for doubtful accounts based on customer-specific analysis and general matters such as current assessment of past due balances and economic conditions. The Company writes off accounts receivable when they become uncollectible. Management identifies a delinquent customer based upon the delinquent payment status of an outstanding invoice, generally greater than 30 days past due date. The delinquent account designation does not trigger an accounting transaction until such time the account is deemed uncollectible. The allowance for doubtful accounts is determined by examining the reserve history and any outstanding invoices that are over 30 days past due as of the end of the reporting period. Accounts are deemed uncollectible on a case-by-case basis, at management’s discretion based upon an examination of the communication with the delinquent customer and payment history. Typically, accounts are only escalated to “uncollectible” status after multiple attempts at collection have proven unsuccessful. Inventory Obsolescence Inventories consist of thermostats, sensors and controllers for Telkonet’s product platforms. These inventories are purchased for resale and do not include manufacturing labor and overhead. Inventories are stated at the lower of cost or net realizable value determined by the first in, first out (FIFO) method. The Company’s inventories are subject to technological obsolescence. Management evaluates the net realizable value of its inventories on a quarterly basis and when it is determined that the Company’s carrying cost of such excess and obsolete inventories cannot be recovered in full, a charge is taken against income for the difference between the carrying cost and the estimated realizable amount. Guarantees and Product Warranties The Company records a liability for potential warranty claims. The amount of the liability is based on the trend in the historical ratio of claims to sales. The products sold are generally covered by a warranty for a period of one year. In the event the Company determines that its current or future product repair and replacement costs exceed its estimates, an adjustment to these reserves would be charged to earnings in the period such determination is made. Product warranties for the nine months ended September 30, 2022 and the year ended December 31, 2021 are as follows: Schedule of product warranty accrual September 30, 2022 December 31, 2021 Beginning balance $ 46,650 $ 45,328 Warranty claims incurred (5,296 ) (16,075 ) Provision charged (credited) to expense (770 ) 17,397 Ending balance $ 40,584 $ 46,650 Income Taxes The Company accounts for income taxes in accordance with ASC 740-10. Under this method, deferred income taxes (when required) are provided based on the difference between the financial reporting and income tax bases of assets and liabilities and net operating losses at the statutory rates enacted for future periods. The Company has a policy of establishing a valuation allowance when it is more likely than not that the Company will not realize the benefits of its deferred income tax assets in the future. The Company follows ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on de-recognition, classification, treatment of interest and penalties, and disclosure of such positions. Stock Based Compensation We account for our stock based awards in accordance with ASC 718, which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including employee stock options and restricted stock awards. We estimate the fair value of stock options granted using the Black-Scholes valuation model. This model requires us to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will retain vested stock options before exercising them and the estimated volatility of our common stock price. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in our consolidated statements of operations. Income (Loss) per Common Share The Company computes earnings per share under ASC 260-10, “Earnings per Share.” Basic net income (loss) per common share is computed using the weighted average shares outstanding. Diluted net income (loss) per common share is computed using the treasury stock method, which assumes that the proceeds to be received on exercise of outstanding stock options and warrants are used to repurchase shares of the Company at the average market price of the common shares for the year. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company's outstanding stock options and warrants. For the three months ended September 30, 2022, there were 105,380,666 2,626,847 250,000 3,349,793 Net income / (loss) attributable to common shareholders: Schedule of earnings per share Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Net Income / (Loss) $ (697,572 ) $ 17,240 $ (1,206,654 ) $ (55,616 ) Less cumulative dividends earned on Preferred stock (23,505 ) (23,505 ) (69,743 ) (69,743 ) Net loss attributable to common shareholders $ (721,077 ) $ (6,265 ) $ (1,276,397 ) $ (125,359 ) Shares used in the calculation of diluted EPS are summarized below: Schedule of weighted average diluted shares Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Weighted average common shares outstanding - basic $ 299,212,282 $ 136,311,335 $ 295,592,261 $ 136,311,335 Dilutive effect of stock options – – – – Weighted average common shares outstanding - diluted $ 299,212,282 $ 136,311,335 $ 295,592,261 $ 136,311,335 Recovery of Long -Lived Assets We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10. Recoverability is measured by comparison of the carrying amount to the future net undiscounted cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds its fair value. Sales Tax Unless provided with a resale or tax exemption certificate, the Company assesses and collects sales tax on sales transactions and records the amount as a liability. It is recognized as a liability until remitted to the applicable state. Total revenues do not include sales tax as the Company is considered a pass through conduit for collecting and remitting sales taxes. Concentrations of Credit Risk Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with quality credit institutions. At times, such investments may be in excess of the FDIC insurance limit. The Company has never experienced any losses related to these balances. With respect to trade receivables, the Company performs ongoing credit evaluations of its customers’ financial conditions and limits the amount of credit extended when deemed necessary. The Company provides credit to its customers primarily in the United States in the normal course of business. The Company routinely assesses the financial strength of its customers and, as a consequence, believes its trade receivables credit risk exposure is limited. Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with an original maturity date of three months or less to be cash equivalents. Fair Value of Financial Instruments The Company accounts for the fair value of financial instruments in accordance with ASC 820, which defines fair value for accounting purposes, established a framework for measuring fair value and expanded disclosure requirements regarding fair value measurements. Fair value is defined as an exit price, which is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The degree of judgment utilized in measuring the fair value of assets and liabilities generally correlates to the level of pricing observability. Financial assets and liabilities with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in active markets generally have more pricing observability and require less judgment in measuring fair value. Conversely, financial assets and liabilities that are rarely traded or not quoted have less price observability and are generally measured at fair value using valuation models that require more judgment. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency of the asset, liability or market and the nature of the asset or liability. The Company categorizes financial assets and liabilities that are recurring, at fair value into a three-level hierarchy in accordance with these provisions: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and are unobservable. The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, and certain accrued liabilities. The carrying amounts of these assets and liabilities approximate fair value due to the short maturity of these instruments (Level 1 instruments), except for the line of credit. The carrying amount of the line of credit approximates fair value due to the interest rate and terms approximating those available to the Company for similar obligations (Level 2 instruments). Leases The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company does not separate non-lease components from lease components to which they relate and accounts for the combined lease and non-lease components as a single lease component. Operating leases are included in our Condensed Consolidated Balance Sheets as operating lease right-of-use assets, lease liabilities – current and lease liabilities – long-term. We do not recognize a right-of-use asset and lease liability for leases with a term of 12 months or less. Our current operating leases are for facilities. Our leases may contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Some of our lease agreements may contain rent escalation clauses, rent holidays, capital improvement funding, or other lease concessions. In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires us to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. When we cannot readily determine the discount rate implicit in the lease agreement, we utilize our current borrowing rate on our outstanding line of credit. The Company’s line of credit utilizes market rates to assess an interest rate. Refer to Note G for further discussion. We recognize our minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. Payments are set on a pre-determined schedule within each lease agreement. We amortize this expense over the term of the lease beginning with the date of the standard adoption for current leases and beginning with the date of initial possession, which is the date we enter the leased space and begin to make improvements in the preparation for its intended use. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate and are recognized as incurred. Variable lease components consist primarily of the Company's proportionate share of common area maintenance, utilities, taxes and insurance and are presented as operating expenses in the Company’s statements of operations in the same line item as expense arising from fixed lease payments. Impact of COVID-19 Pandemic The Company’s operations and financial results continue to be negatively impacted by the COVID-19 pandemic and its successive variants. Depending on the length and severity of the COVID-19 pandemic, the demand for our products, our customers’ ability to meet payment obligations to the Company, our supply chain and production capabilities, and our workforce’s ability to deliver our products and services could well be impacted. Management continues to monitor the impact of the global situation on the Company’s financial condition, liquidity, operations, suppliers, industry, and workforce. We expect this disruption to continue to have a material adverse impact on our results of operations, financial condition, cash flows, and liquidity. Capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that the COVID-19 pandemic could cause a local, national and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole, but it is presently unknown whether and to what extent further fiscal actions will continue. The magnitude and overall effectiveness of these actions remain uncertain. The hospitality industry, our largest market that generally accounts for a majority of our revenue, has suffered as much as any since the onset of the pandemic. While the industry is trending toward recovery, the situation remains fragile. The effects of supply-chain issues, inflation, labor shortages, and subsequent rising wages, all present some level of pandemic uncertainty for the foreseeable future. STR and Tourism Economics expect leisure travel to pace the recovery while commercial demand, the dominant segment, will remain significantly below pre-pandemic levels until there is a significant increase in the quantity of large group events, as well as the return of business travel 1 2 ________________________ 1 2 |
NEW ACCOUNTING PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Changes and Error Corrections [Abstract] | |
NEW ACCOUNTING PRONOUNCEMENTS | NOTE B – NEW ACCOUNTING PRONOUNCEMENTS In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 provides guidance for estimating credit losses on certain types of financial instruments, including trade receivables, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The guidance requires a modified retrospective transition method and early adoption is permitted. In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses, Derivatives and Hedging, and Leases (“ASU 2019-10”), which defers the adoption of ASU 2016-13 for smaller reporting companies until January 1, 2023. The Company will continue to evaluate the impact of ASU 2016-13 on its consolidated financial statements. Management has evaluated other recently issued accounting pronouncements and does not believe any will have a significant impact on our consolidated financial statements and related disclosures. |
REVENUE
REVENUE | 9 Months Ended |
Sep. 30, 2022 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | NOTE C – REVENUE The following table presents the Company’s product and recurring revenues disaggregated by industry for the three months ended September 30, 2022. Disaggregation of revenues Hospitality Education Multiple Dwelling Units Government Healthcare Total Product Revenue $ 1,441,286 $ 319,115 $ 98 $ 68,455 $ 0 $ 1,828,954 Recurring Revenue 165,540 22,840 0 0 0 188,380 $ 1,606,826 $ 341,955 $ 98 $ 68,455 $ 0 $ 2,017,334 % of Total 80 17 0 3 0 100 The following table presents the Company’s product and recurring revenues disaggregated by industry for the nine months ended September 30, 2022. Hospitality Education Multiple Dwelling Units Government Healthcare Total Product Revenue $ 3,921,615 $ 1,233,998 $ 73,552 $ 341,247 $ 363 $ 5,570,775 Recurring Revenue 460,037 75,597 0 0 0 535,634 $ 4,381,652 $ 1,309,595 $ 73,552 $ 341,247 $ 363 $ 6,106,409 % of Total 72 21 1 6 0 100 The following table presents the Company’s product and recurring revenues disaggregated by industry for the three months ended September 30, 2021. Hospitality Education Multiple Dwelling Units Government Healthcare Total Product Revenue $ 1,195,394 $ 39,577 $ 33,728 $ 21,690 $ 0 $ 1,290,389 Recurring Revenue 96,211 67,468 – – – 163,679 $ 1,291,605 $ 107,045 $ 33,728 $ 21,690 $ 0 $ 1,454,068 % of Total 89 8 2 1 0 100 The following table presents the Company’s product and recurring revenues disaggregated by industry for the nine months ended September 30, 2021. Hospitality Education Multiple Dwelling Units Government Healthcare Total Product Revenue $ 3,463,056 $ 123,975 $ 290,936 $ 144,997 $ 48,195 $ 4,071,159 Recurring Revenue 408,604 97,542 26,461 0 0 532,607 $ 3,871,660 $ 221,517 $ 317,397 $ 144,997 $ 48,195 $ 4,603,766 % of Total 84 5 7 3 1 100 Sales taxes and other usage-based taxes are excluded from revenues. Remaining performance obligations As of September 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $ 0.7 million 100 Contract assets and liabilities Contract Assets and Liabilities September 30, 2022 December 31, 2021 Contract assets $ 27,579 $ 266,014 Contract liabilities - current 940,056 800,965 Contracts are billed in accordance with the terms and conditions, either at periodic intervals or upon substantial completion. This can result in billings occurring subsequent to revenue recognition, resulting in contract assets. Contract assets are presented as current assets in the Condensed Consolidated Balance Sheet. Often, the Company will require customers to pay a deposit upon contract signing that will be applied against work performed or products shipped. In addition, the Company will often invoice the full term of support at the start of the support period. Billings that occur prior to revenue recognition result in contract liabilities. The change in the contract liability balance during the three-month period ended September 30, 2022 is the result of cash payments received and billing in advance of satisfying performance obligations. Contract costs Costs to complete a turnkey contract primarily relate to the materials cost and direct labor and are recognized proportionately as the performance obligation is satisfied. The Company will defer costs to complete a contract when materials have shipped (and control over the materials has transferred to the customer), but an insignificant amount of rooms have been installed. The Company will recognize any deferred costs in proportion to revenues recognized from the related turnkey contract. The Company does not expect deferred contract costs to be long-lived since a typical turnkey project takes approximately 60 days to complete. Deferred contract costs are generally presented as other current assets in the Condensed Consolidated Balance Sheets. The Company incurs incremental costs to obtain a contract in the form of sales commissions. These costs, whether related to performance obligations that extend beyond 12 months or not, are immaterial and will continue to be recognized in the period incurred within selling, general and administrative expenses. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 9 Months Ended |
Sep. 30, 2022 | |
Receivables [Abstract] | |
ACCOUNTS RECEIVABLE | NOTE D – ACCOUNTS RECEIVABLE Components of accounts receivable as of September 30, 2022 and December 31, 2021 are as follows: Schedule of accounts receivable September 30, 2022 December 31, 2021 Accounts receivable $ 2,001,844 $ 1,016,117 Allowance for doubtful account (62,168 ) (5,563 ) Accounts receivable, net $ 1,939,676 $ 1,010,554 |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2022 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | NOTE E – INVENTORIES Components of inventories as of September 30, 2022 and December 31, 2021 are as follows: Schedule of components of inventories September 30, 2022 December 31, 2021 Product purchased for resale $ 1,551,676 $ 1,269,056 Inventory - In Transit 235,000 – Inventory - Obsolescence Reserve (378,234 ) (443,497 ) Inventory, net $ 1,408,442 $ 825,559 |
CURRENT ACCRUED LIABILITIES
CURRENT ACCRUED LIABILITIES | 9 Months Ended |
Sep. 30, 2022 | |
Payables and Accruals [Abstract] | |
CURRENT ACCRUED LIABILITIES | NOTE F – CURRENT ACCRUED LIABILITIES Current accrued liabilities at September 30, 2022 and December 31, 2021 are as follows: Schedule of accrued liabilities and expenses September 30, 2022 December 31, 2021 Accrued payroll and payroll taxes $ 244,255 $ 242,131 Accrued inventory in transit 157,263 – Accrued professional fees 118,453 136,584 Accrued sales taxes, penalties and interest 35,087 16,634 Product warranties 40,584 46,650 Other accrued liabilities 302,896 276,722 Total current accrued liabilities $ 898,538 $ 718,721 |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE G – DEBT Revolving Credit Facility On September 30, 2014, the Company entered into a loan and security agreement (the “Heritage Bank Loan Agreement”), with Heritage Bank of Commerce, a California state chartered bank (“Heritage Bank”), governing a revolving credit facility in a principal amount not to exceed $ 2,000,000 1,000,000 The outstanding principal balance of the Credit Facility bears interest at the Prime Rate plus 3.00% 9.25 6.25 250,000 0.20 October 9, 2021 September 30, 2021 September 30, 2019 On September 30, 2021, the Company entered into a twelfth amendment to the Heritage Bank Loan Agreement (the “Twelfth Amendment”) to extend the revolving maturity date to December 31, 2021, unless earlier accelerated under the terms of the Heritage Bank Loan Agreement. In addition, subject to certain conditions as specified in the Twelfth Amendment, Heritage Bank consented to the VDA Transaction (as described above in Note A – Basis of Presentation and Significant Accounting Policies - Business) between the Company and VDA, and acknowledged and agreed that certain events occurring in connection with the VDA Transaction, including the change of control of the Company resulting from the VDA Transaction, do not constitute Events of Default as defined in the Heritage Bank Loan Agreement. On December 13, 2021, the Company entered into a thirteenth amendment to the Heritage Bank Loan Agreement (the “Thirteenth Amendment”) to extend the revolving maturity date to March 31, 2022, unless earlier accelerated under the terms of the Heritage Bank Loan Agreement. In addition, the Thirteenth Amendment reduced the credit extension amount to $ 1,000,000 2,000,000 On March 10, 2022, the Company entered into a fourteenth amendment to the Heritage Bank Loan Agreement to extend the revolving maturity date to June 30, 2023 The Heritage Bank Loan Agreement contains covenants that place restrictions on, among other things, the incurrence of debt, granting of liens and sale of assets. The Heritage Bank Loan Agreement also contains financial covenants. As discussed above, the EBITDA loss covenant was eliminated in the Eleventh Amendment. The sole financial covenants are a minimum asset coverage ratio and a minimum unrestricted cash balance of $1 million, both of which are measured at the end of each month. A violation of either of these covenants could result in an event of default under the Heritage Bank Loan Agreement. Upon the occurrence of such an event of default or certain other customary events of defaults, payment of any outstanding amounts under the Credit Facility may be accelerated and Heritage Bank’s commitment to extend credit under the Heritage Bank Loan Agreement may be terminated. The Heritage Bank Loan Agreement contains other representations and warranties, covenants, and other provisions customary to transactions of this nature. The outstanding balance on the Credit Facility was $ 0 403,089 1,000,000 460,000 Paycheck Protection Program The Company has received two loans under the Paycheck Protection Program (the “PPP”) administered by the United States Small Business Administration (the “SBA”) and authorized by the Keeping American Workers Employed and Paid Act, which is part of the Coronavirus Aid, Relief, and Economic Security Act, enacted on March 27, 2020. On April 17, 2020, the Company entered into an unsecured promissory note for $ 913,063 913,063 7,610 On April 27, 2021, the Company entered into an unsecured promissory note, dated as of April 26, 2021, for a second PPP loan (“the Second PPP Loan” and together with the First PPP Loan, the “PPP Loans”), with Heritage Bank under a second draw of the PPP administered by the SBA and authorized by the Keeping American Workers Employed and Paid Act. In September 2021, the Company applied for forgiveness of the amount due on the Second PPP Loan. On September 15, 2021, Heritage Bank confirmed that the Second PPP Loan granted to the Company, in the original principal amount of $ 913,063 3,044 The total amount forgiven in 2021 for principal and accrued interest under the PPP Loans was $ 1,836,780 |
CAPITAL STOCK
CAPITAL STOCK | 9 Months Ended |
Sep. 30, 2022 | |
Equity [Abstract] | |
CAPITAL STOCK | NOTE H – CAPITAL STOCK Series A The Company has designated 215 0.363 215 1,628,800 0.33 13,774 1,075,000 Series B The Company has designated 567 0.13 267 0.13 38,461 0.13 1,335,000 5,211,542 0.13 38,461 0.13 1,355,000 486 Preferred stock carries certain preference rights as detailed in the Company’s Amended Articles of Incorporation related to both the payment of dividends and as to payments upon liquidation in preference to any other class or series of capital stock of the Company. As of September 30, 2022, the liquidation preference of the preferred stock is based on the following order: first, Series B with a preference value of $ 513,179 253,179 1,837,198 932,198 |
STOCK OPTIONS AND WARRANTS
STOCK OPTIONS AND WARRANTS | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
STOCK OPTIONS AND WARRANTS | NOTE I – STOCK OPTIONS AND WARRANTS Employee Stock Options The Company maintains an equity incentive plan (the “2020 Plan”). The 2020 Plan was established in 2020 as an incentive plan for officers, employees, non-employee directors, prospective employees and other key persons. The 2020 Plan replaced the 2010 Amended and Restated Stock Option and Incentive Plan, as amended (the “2010 Plan”), which expired on November 17, 2020. The 2020 Plan is administered by the Board of Directors or the Compensation Committee, which is comprised of not less than two non-employee directors who are independent. A total of 10,000,000 10,000,000 It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a better alignment of their interests with those of the Company and its stockholders. The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees of the Company under the 2010 Plan as of September 30, 2022. No options have been issued under the 2020 Plan. Schedule of options by exercise price Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Remaining Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $.01-$0.15 2,000,000 2.38 $ 0.14 2,000,000 $ 0.14 $.16-$0.20 626,847 0.98 $ 0.18 626,847 $ 0.18 2,626,847 2.05 $ 0.16 2,626,847 $ 0.16 Transactions involving stock options issued to employees are summarized as follows: Schedule of option activity 2022 2021 Number of Shares Weighted Average Exercise Price Value Number of Shares Weighted Average Exercise Price Value Balance Jan 1 3,349,793 $ 0.16 $ 535,967 3,349,793 $ 0.16 $ 535,967 Granted – – – – – – Cancelled, Expired (26,241 ) 0.17 (4,461 ) – – – Exercised – – – – – – Balance March 31 3,323,552 0.16 531,506 3,349,793 0.16 535,967 Granted – – – – – – Cancelled, Expired (541,149 ) 0.16 (86,584 ) – – – Exercised – – – – – – Balance June 30 2,782,403 0.16 444,922 3,349,793 0.16 535,967 Granted – – – – – – Cancelled, Expired (155,556 ) 0.18 (28,000 ) – – – Exercised – – – – – – Balance Sep 30 2,626,847 $ 0.16 $ 416,922 3,349,793 $ 0.16 $ 535,967 The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules, exercise patterns and pre-vesting and post-vesting forfeitures. The Company estimates the volatility of the Company’s common stock based on the calculated historical volatility of the Company’s common stock using the share price data for the trailing period equal to the expected term prior to the date of the award. The Company bases the risk-free interest rate used in the Black Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. The Company has not paid any cash dividends on the Company’s common stock and does not anticipate paying any cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes option valuation model. The Company uses historical data to estimate pre-vesting option forfeitures and records share-based compensation for those awards that are expected to vest. In accordance with ASC 718-10, the Company calculates share-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. During the quarter and nine months ended September 30, 2022 no no Total stock-based compensation expense for the quarter ended September 30, 2022 and 2021 was $ 1,815 1,815 5,445 5,446 Warrants The following table summarizes the changes in warrants outstanding. Schedule of warrants outstanding and exercisable Number of Shares Weighted Price / Share Outstanding at January 1, 2021 250,000 $ 0.16 Granted – – Exercised – – Cancelled or Expired (250,000 ) 0.16 Outstanding at December 31, 2021 – $ – Granted 105,380,666 0.06 Exercised – – Cancelled or Expired – – Outstanding at March 31, 2022 105,380,666 $ 0.06 Granted – – Exercised – – Cancelled or Expired – – Outstanding at June 30, 2022 105,380,666 $ 0.06 Granted – – Exercised – – Cancelled or Expired – – Outstanding at September 30, 2022 105,380,666 $ 0.06 |
STOCK ISSUANCE TO NON-EMPLOYEE
STOCK ISSUANCE TO NON-EMPLOYEE DIRECTORS | 9 Months Ended |
Sep. 30, 2022 | |
Stock Issuance To Non-employee Directors | |
STOCK ISSUANCE TO NON-EMPLOYEE DIRECTORS | NOTE J – STOCK ISSUANCE TO NON-EMPLOYEE DIRECTORS During the quarters ended September 30, 2022 and 2021, the Company issued no 0 18,000 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE K – COMMITMENTS AND CONTINGENCIES In October 2013, the Company entered into a lease agreement for 6,362 April 30, 2026 In May 2017, the Company entered into a lease agreement for 5,838 In November 2021, the Company entered into a lease agreement for 425 The components of lease expense for the three and nine months ended September 30 are as follows: Components of lease expense Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Operating lease cost - fixed $ 49,947 $ 57,387 $ 146,236 $ 172,161 Variable lease cost 25,933 30,213 88,952 91,688 Total operating lease cost $ 75,880 $ 87,600 $ 235,188 $ 263,849 Other information related to leases as of September 30 is as follows: Other information related to leases September 30, 2022 December 31, 2021 Operating lease liability - current $ 153,276 $ 195,176 Operating lease liability - long term 391,680 459,668 Operating cash flows from operating leases 109,888 242,305 Weighted-average remaining lease term of operating leases 3.2 4.1 Weighted-average discount rate of operating leases 8.5 8.5 Future annual minimum operating lease payments as of September 30, 2022 were as follows: Future annual minimum operating lease payments 2022 (excluding the months already reported upon) $ 47,771 2023 193,169 2024 172,424 2025 158,510 2026 53,185 2027 and thereafter – Total minimum lease payments 625,059 Less imputed interest (80,103 ) Total $ 544,956 Rental expenses charged to operations for the 3 months ended September 30, 2022 and 2021 were $ 75,880 87,600 235,188 263,849 Employment and Consulting Agreements The Company has employment agreements with certain of its key employees which include non-disclosure and confidentiality provisions for protection of the Company’s proprietary information. Under the terms of a Consulting Agreement dated January 7, 2022, Piercarlo Gramaglia will serve as Chief Executive Officer of the Company for a term of eighteen (18) months, unless earlier terminated pursuant to the terms of the Consulting Agreement. In exchange for his service as Chief Executive Officer, the Company will pay Mr. Gramaglia an annual fee of $ 30,000 John M. Srouji, Chief Sales & Operations Officer, is employed pursuant to an employment agreement with us effective August 16, 2022 and expiring on May 31, 2026. The term of the employment agreement will automatically renew for an additional twelve months. Mr. Srouji will receive a base salary of $ 300,000 25,000 20,000 Jeffrey J. Sobieski, Chief Technology Officer, is employed pursuant to an employment agreement with us effective January 7, 2022. Mr. Sobieski’s employment agreement has an initial term of one (1) year, which will automatically renew for a period of an additional twelve (12) months, and provides for a base salary of $ 211,625 Richard E. Mushrush, Chief Financial Officer, is employed pursuant to an employment agreement with us effective January 7, 2022. Mr. Mushrush’s employment agreement has an initial term of one (1) year, which will automatically renew for a period of an additional twelve (12) months, and provides for a base salary of $ 122,000 In addition to the foregoing, stock options may be periodically granted to employees under the Company’s 2020 equity incentive plan at the discretion of the Compensation Committee of the Board of Directors. Executives of the Company are eligible to receive stock option grants, based upon individual performance and the performance of the Company as a whole. Litigation The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, other than the Sipco litigation discussed below, which has been dismissed, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity. Sipco Litigation and License Agreement The Company continues to fulfill its obligations under the Wireless Network Patent License Agreement (the “License Agreement”) between SIPCO, LLC (“Sipco”) and IPCO, LLC dba IntusIQ (collectively, the “Licensors”) and the Company, dated November 30, 2020. The parties entered into the License Agreement in connection with the settlement of a lawsuit filed by Sipco as disclosed in more detail in the Company’s previously filed reports. The minimum payments required under the License Agreement have been accrued for on the Company’s Condensed Consolidated Balance Sheets in accordance with GAAP, which specifies that when a liability is probable and the amount can be reasonably estimated, said liability should be recorded in the current reporting period. Per the License Agreement, the contractual minimum payments began on January 1, 2022 and continue until December 31, 2024, thus satisfying both criteria of probable and reasonably estimable. Accordingly, a long-term liability was recorded representing the sum of those contractual minimums. As of September 2022, the Company had a current liability of approximately $ 196,724 56,724 140,000 255,000 Indemnification Agreements On March 31, 2010, the Company entered into Indemnification Agreements with executives Jason L. Tienor, then President and Chief Executive Officer, and Jeffrey J. Sobieski, then Chief Operating Officer. On April 24, 2012, the Company entered into an Indemnification Agreement with director Tim S. Ledwick. On January 1, 2017, the Company entered into an Indemnification Agreement with Chief Financial Officer Richard E. Mushrush. The Indemnification Agreements provide that the Company will indemnify the Company's officers and directors, to the fullest extent permitted by law, relating to, resulting from or arising out of any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation by reason of the fact that such officer or director (i) is or was a director, officer, employee or agent of the Company or (ii) is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In addition, the Indemnification Agreements provide that the Company will make an advance payment of expenses to any officer or director who has entered into an Indemnification Agreement, in order to cover a claim relating to any fact or occurrence arising from or relating to events or occurrences specified in this paragraph, subject to receipt of an undertaking by or on behalf of such officer or director to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company as authorized under the Indemnification Agreement. Sales Tax The following table sets forth the change in the sales tax accrual as of September 30, 2022 and December 31, 2021: Schedule of sales tax accrual September 30, 2022 December 31, 2021 Beginning balance $ 16,634 $ 31,396 Sales tax collected 122,460 85,589 Provisions (reversals) 8,231 (7,685 ) Payments (112,238 ) (92,666 ) Ending balance $ 35,087 $ 16,634 |
BUSINESS CONCENTRATION
BUSINESS CONCENTRATION | 9 Months Ended |
Sep. 30, 2022 | |
Risks and Uncertainties [Abstract] | |
BUSINESS CONCENTRATION | NOTE L – BUSINESS CONCENTRATION For the nine months ended September 30, 2022, two customers, each representing over 15% of total net revenues, accounted for approximately 36 21 As of September 30, 2022, one customer accounted for approximately 30% of the Company’s net accounts receivable. As of December 31, 2021, there were five customers, each representing over 10% of the Company’s net accounts receivable, accounting for 64 For the nine months ended September 30, 2022, purchases from two suppliers, accounted for approximately 95 The amount due to one supplier, net of deposits paid, was approximately $ 46,000 134,000 |
BASIS OF PRESENTATION AND SIG_2
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Telkonet, Inc. (the “Company” or “Telkonet”) have been prepared in accordance with Rule S-X of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. However, the results from operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated December 31, 2021 financial statements and footnotes thereto included in the Company's Form 10-K filed with the SEC. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Telkonet Communications, Inc., operating as a single reportable business segment. |
Business | Business Telkonet, Inc. (“we,” “us,” “our,” the “Company,” or “Telkonet”), formed in 1999 and incorporated under the laws of the state of Utah, is the creator of the EcoSmart and the Rhapsody Platforms of intelligent automation solutions designed to optimize energy efficiency, comfort and analytics in support of the emerging Internet of Things (“IoT”). The platforms are deployed primarily in the hospitality, educational, governmental and other commercial markets, and is specified by engineers, HVAC professionals, building owners, and building operators. We currently operate in a single reportable business segment. In 2007, the Company acquired substantially all of the assets of Smart Systems International (“SSI”), which was a provider of energy management products and solutions to customers in the United States and Canada and the precursor to the Company’s EcoSmart Platform. In 2020, the Company launched the Rhapsody Platform, which simplifies the installation and setup of the Company’s newest products and integrations. Both platforms provide comprehensive savings, management reporting, analytics and virtual engineering of a customer’s portfolio and/or property’s room-by-room energy consumption. Telkonet has deployed more than a half million intelligent devices worldwide in properties within the hospitality, educational, governmental and other commercial markets. The platforms are recognized as solutions for reducing energy consumption, operational costs and carbon footprints, and eliminating the need for new energy generation in these marketplaces – all whilst improving occupant comfort and convenience. On August 6, 2021, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with VDA Group S.p.A., an Italian joint stock company (“VDA”), pursuant to which VDA would, at the Closing (as defined in the Purchase Agreement), contribute $ 5 million 162,900,947 105,380,666 Following the issuance of 162,900,947 shares of the Company’s common stock to VDA upon the Closing, VDA owns 53% of the issued and outstanding common stock on a fully diluted as exercised/converted basis, resulting in a change of control of the Company. VDA could eventually own as much as 65% of the issued and outstanding common stock on a fully diluted as exercised/converted basis if it fully exercises the Warrant. The Company has elected not to apply pushdown accounting adjustments to the Company’s financial statements related to the change in control as allowed by Accounting Standards Update No. 2014-17. |
Critical Accounting Policies and Estimates | Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, the Company evaluates significant estimates used in preparing its consolidated financial statements including those related to revenue recognition and allowances for uncollectible accounts receivable, inventory obsolescence, recovery of long-lived assets, income tax provisions and related valuation allowance, stock-based compensation, and contingencies. The Company bases its estimates on historical experience, underlying run rates and various other assumptions that the Company believes to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from these estimates. The following critical judgments, assumptions, and estimates used in the preparation of the consolidated financial statements are summarized below. Please refer to our most recent Form 10-K filed with the SEC for a more in-depth analysis of such policies. |
Revenue from Contracts with Customers | Revenue from Contracts with Customers Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606, the Standard”) supersedes nearly all legacy revenue recognition guidance. ASC 606, the Standard outlines a comprehensive five-step revenue recognition model based on the principle that an entity should recognize revenue based on when it satisfies its performance obligations by transferring control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for said goods or services, as follows: i) Identify the customer contracts The Company accounts for a customer contract under ASC 606 when the contract is legally enforceable. A contract is legally enforceable when all of the following criteria are met: (1) the contract has been approved by the Company and the customer and both parties are committed to perform their respective obligations, (2) the Company can identify each party’s rights regarding goods or services transferred, (3) the Company can identify payment terms for goods or services transferred, (4) the contract has commercial substance, and (5) collectability of all the consideration to which the Company is entitled in exchange for the goods or services transferred is probable. A contract does not exist if each party to the contract has the unilateral right to terminate a wholly unperformed contract without compensating the other party (or parties). Nearly all of the Company’s contracts do not contain such mutual termination rights for convenience. All contracts are in written form. ii) Identify the performance obligations The Company will enter into product only contracts that contain a single performance obligation related to the transfer of products to a customer. The Company will also enter into certain customer contracts that encompass product and installation services, referred to as “turnkey” solutions. These contracts ultimately provide the customer with a solution that enhances the functionality of the customer’s existing equipment. For this reason, the Company has determined that the product and installation services are not separately identifiable performance obligations, but in essence represent one, combined performance obligation. The Company also offers post-installation support services to customers. Support services are considered a separate performance obligation. iii) Determine the transaction price The Company generally enters into contracts containing fixed prices. It is not customary for the Company to include contract terms that would result in variable consideration. In the rare situation that a contract does include this type of provision, it is not expected to result in a material adjustment to the transaction price. The Company regularly extends pricing discounts; however, they are negotiated up front and adjust the fixed transaction price set out in the contract. Customer contracts will typically contain upfront deposits that will be applied against future invoices, as well as customer retainage. The intent of any required deposit or retainage is to ensure that the obligations of either party are honored and follow customary industry practices. In addition, the Company will typically be paid in advance at the beginning of any support contracts, consistent with industry practices. None of these payment provisions are intended to represent significant implicit financing. The Company’s standard payment terms are thirty days from invoice date. Products are fully refundable when returned in their original packaging without damage or defacing less a restocking fee. Historical returns have shown to be immaterial. The Company offers a standard one-year assurance warranty. However customers can purchase an extended warranty. Under the revenue standard, extended warranties are accounted for as a service warranty, requiring the revenue to be recognized over the extended service periods. Contracts involving an extended warranty are immaterial and will continue to be combined with support revenue and recognized on a straight-line basis over the support revenue term. iv) Allocate the transaction price to the performance obligations Revenues from customer contracts are allocated to the separate performance obligations based on their relative stand-alone selling price (“SSP”) at contract inception. The SSP is the price at which the Company would sell a promised good or service separately. The best evidence of an SSP is the observable price of a good or service when the entity sells that good or service separately in similar circumstances and to similar customers. However, turnkey solutions are sold for a broad range of amounts resulting from, but not limited to, tiered discounting for value added resellers based upon committed volumes and other economic factors. Due to the high variability of our pricing, the Company cannot establish a reliable SSP using observable data. Accordingly, the Company uses the residual approach to allocate the transaction price to performance obligations related to its turnkey solutions. When support services are not included within the turnkey solution, the residual method is not utilized and no allocation of the transaction price to the performance obligation is necessary. All support service agreements, whether single or multi-year terms, automatically renew for one-year terms at a suggested retail price (“SRP”), unless terminated by either party. Support service renewals are consistently priced and therefore would support the use of SRP as the best estimate of an SSP for such performance obligations. v) Revenue Recognition The Company recognizes revenues from product only sales at a point in time when control over the product has transferred to the customer. As the Company’s principal terms of sale are FOB shipping point, the Company primarily transfers control and records revenue for product only sales upon shipment. |
Contract Fulfillment Cost | Contract Fulfillment Cost The Company recognizes related costs of the contract over time in relation to the revenue recognition. Costs included within the projects relate to the cost of material, direct labor and costs of outside services utilized to complete projects. These are presented as “Contract assets” in the Condensed Consolidated Balance Sheet. |
Advertising | Advertising The Company follows the policy of charging the costs of advertising to expenses as incurred. The Company incurred $ 0 2,751 3,402 5,725 |
Research and Development | Research and Development The Company accounts for research and development costs in accordance with the ASC 730-10, “Research and Development”. Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. Total expenditures on research and product development for the three months ended September 30, 2022 and 2021 were $ 272,144 268,917 798,913 876,778 |
Accounts Receivable | Accounts Receivable Accounts receivable are uncollateralized customer obligations due under normal trade terms. The Company records allowances for doubtful accounts based on customer-specific analysis and general matters such as current assessment of past due balances and economic conditions. The Company writes off accounts receivable when they become uncollectible. Management identifies a delinquent customer based upon the delinquent payment status of an outstanding invoice, generally greater than 30 days past due date. The delinquent account designation does not trigger an accounting transaction until such time the account is deemed uncollectible. The allowance for doubtful accounts is determined by examining the reserve history and any outstanding invoices that are over 30 days past due as of the end of the reporting period. Accounts are deemed uncollectible on a case-by-case basis, at management’s discretion based upon an examination of the communication with the delinquent customer and payment history. Typically, accounts are only escalated to “uncollectible” status after multiple attempts at collection have proven unsuccessful. |
Inventory Obsolescence | Inventory Obsolescence Inventories consist of thermostats, sensors and controllers for Telkonet’s product platforms. These inventories are purchased for resale and do not include manufacturing labor and overhead. Inventories are stated at the lower of cost or net realizable value determined by the first in, first out (FIFO) method. The Company’s inventories are subject to technological obsolescence. Management evaluates the net realizable value of its inventories on a quarterly basis and when it is determined that the Company’s carrying cost of such excess and obsolete inventories cannot be recovered in full, a charge is taken against income for the difference between the carrying cost and the estimated realizable amount. |
Guarantees and Product Warranties | Guarantees and Product Warranties The Company records a liability for potential warranty claims. The amount of the liability is based on the trend in the historical ratio of claims to sales. The products sold are generally covered by a warranty for a period of one year. In the event the Company determines that its current or future product repair and replacement costs exceed its estimates, an adjustment to these reserves would be charged to earnings in the period such determination is made. Product warranties for the nine months ended September 30, 2022 and the year ended December 31, 2021 are as follows: Schedule of product warranty accrual September 30, 2022 December 31, 2021 Beginning balance $ 46,650 $ 45,328 Warranty claims incurred (5,296 ) (16,075 ) Provision charged (credited) to expense (770 ) 17,397 Ending balance $ 40,584 $ 46,650 |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC 740-10. Under this method, deferred income taxes (when required) are provided based on the difference between the financial reporting and income tax bases of assets and liabilities and net operating losses at the statutory rates enacted for future periods. The Company has a policy of establishing a valuation allowance when it is more likely than not that the Company will not realize the benefits of its deferred income tax assets in the future. The Company follows ASC 740-10-25, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on de-recognition, classification, treatment of interest and penalties, and disclosure of such positions. |
Stock Based Compensation | Stock Based Compensation We account for our stock based awards in accordance with ASC 718, which requires a fair value measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including employee stock options and restricted stock awards. We estimate the fair value of stock options granted using the Black-Scholes valuation model. This model requires us to make estimates and assumptions including, among other things, estimates regarding the length of time an employee will retain vested stock options before exercising them and the estimated volatility of our common stock price. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Changes in these estimates and assumptions can materially affect the determination of the fair value of stock-based compensation and consequently, the related amount recognized in our consolidated statements of operations. |
Income (Loss) per Common Share | Income (Loss) per Common Share The Company computes earnings per share under ASC 260-10, “Earnings per Share.” Basic net income (loss) per common share is computed using the weighted average shares outstanding. Diluted net income (loss) per common share is computed using the treasury stock method, which assumes that the proceeds to be received on exercise of outstanding stock options and warrants are used to repurchase shares of the Company at the average market price of the common shares for the year. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company's outstanding stock options and warrants. For the three months ended September 30, 2022, there were 105,380,666 2,626,847 250,000 3,349,793 Net income / (loss) attributable to common shareholders: Schedule of earnings per share Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Net Income / (Loss) $ (697,572 ) $ 17,240 $ (1,206,654 ) $ (55,616 ) Less cumulative dividends earned on Preferred stock (23,505 ) (23,505 ) (69,743 ) (69,743 ) Net loss attributable to common shareholders $ (721,077 ) $ (6,265 ) $ (1,276,397 ) $ (125,359 ) Shares used in the calculation of diluted EPS are summarized below: Schedule of weighted average diluted shares Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Weighted average common shares outstanding - basic $ 299,212,282 $ 136,311,335 $ 295,592,261 $ 136,311,335 Dilutive effect of stock options – – – – Weighted average common shares outstanding - diluted $ 299,212,282 $ 136,311,335 $ 295,592,261 $ 136,311,335 |
Recovery of Long -Lived Assets | Recovery of Long -Lived Assets We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10. Recoverability is measured by comparison of the carrying amount to the future net undiscounted cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds its fair value. |
Sales Tax | Sales Tax Unless provided with a resale or tax exemption certificate, the Company assesses and collects sales tax on sales transactions and records the amount as a liability. It is recognized as a liability until remitted to the applicable state. Total revenues do not include sales tax as the Company is considered a pass through conduit for collecting and remitting sales taxes. |
Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with quality credit institutions. At times, such investments may be in excess of the FDIC insurance limit. The Company has never experienced any losses related to these balances. With respect to trade receivables, the Company performs ongoing credit evaluations of its customers’ financial conditions and limits the amount of credit extended when deemed necessary. The Company provides credit to its customers primarily in the United States in the normal course of business. The Company routinely assesses the financial strength of its customers and, as a consequence, believes its trade receivables credit risk exposure is limited. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with an original maturity date of three months or less to be cash equivalents. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company accounts for the fair value of financial instruments in accordance with ASC 820, which defines fair value for accounting purposes, established a framework for measuring fair value and expanded disclosure requirements regarding fair value measurements. Fair value is defined as an exit price, which is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. The degree of judgment utilized in measuring the fair value of assets and liabilities generally correlates to the level of pricing observability. Financial assets and liabilities with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in active markets generally have more pricing observability and require less judgment in measuring fair value. Conversely, financial assets and liabilities that are rarely traded or not quoted have less price observability and are generally measured at fair value using valuation models that require more judgment. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency of the asset, liability or market and the nature of the asset or liability. The Company categorizes financial assets and liabilities that are recurring, at fair value into a three-level hierarchy in accordance with these provisions: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and are unobservable. The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, and certain accrued liabilities. The carrying amounts of these assets and liabilities approximate fair value due to the short maturity of these instruments (Level 1 instruments), except for the line of credit. The carrying amount of the line of credit approximates fair value due to the interest rate and terms approximating those available to the Company for similar obligations (Level 2 instruments). |
Leases | Leases The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company does not separate non-lease components from lease components to which they relate and accounts for the combined lease and non-lease components as a single lease component. Operating leases are included in our Condensed Consolidated Balance Sheets as operating lease right-of-use assets, lease liabilities – current and lease liabilities – long-term. We do not recognize a right-of-use asset and lease liability for leases with a term of 12 months or less. Our current operating leases are for facilities. Our leases may contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Some of our lease agreements may contain rent escalation clauses, rent holidays, capital improvement funding, or other lease concessions. In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires us to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. When we cannot readily determine the discount rate implicit in the lease agreement, we utilize our current borrowing rate on our outstanding line of credit. The Company’s line of credit utilizes market rates to assess an interest rate. Refer to Note G for further discussion. We recognize our minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. Payments are set on a pre-determined schedule within each lease agreement. We amortize this expense over the term of the lease beginning with the date of the standard adoption for current leases and beginning with the date of initial possession, which is the date we enter the leased space and begin to make improvements in the preparation for its intended use. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate and are recognized as incurred. Variable lease components consist primarily of the Company's proportionate share of common area maintenance, utilities, taxes and insurance and are presented as operating expenses in the Company’s statements of operations in the same line item as expense arising from fixed lease payments. |
Impact of COVID-19 Pandemic | Impact of COVID-19 Pandemic The Company’s operations and financial results continue to be negatively impacted by the COVID-19 pandemic and its successive variants. Depending on the length and severity of the COVID-19 pandemic, the demand for our products, our customers’ ability to meet payment obligations to the Company, our supply chain and production capabilities, and our workforce’s ability to deliver our products and services could well be impacted. Management continues to monitor the impact of the global situation on the Company’s financial condition, liquidity, operations, suppliers, industry, and workforce. We expect this disruption to continue to have a material adverse impact on our results of operations, financial condition, cash flows, and liquidity. Capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that the COVID-19 pandemic could cause a local, national and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole, but it is presently unknown whether and to what extent further fiscal actions will continue. The magnitude and overall effectiveness of these actions remain uncertain. The hospitality industry, our largest market that generally accounts for a majority of our revenue, has suffered as much as any since the onset of the pandemic. While the industry is trending toward recovery, the situation remains fragile. The effects of supply-chain issues, inflation, labor shortages, and subsequent rising wages, all present some level of pandemic uncertainty for the foreseeable future. STR and Tourism Economics expect leisure travel to pace the recovery while commercial demand, the dominant segment, will remain significantly below pre-pandemic levels until there is a significant increase in the quantity of large group events, as well as the return of business travel 1 2 ________________________ 1 2 |
BASIS OF PRESENTATION AND SIG_3
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of product warranty accrual | Schedule of product warranty accrual September 30, 2022 December 31, 2021 Beginning balance $ 46,650 $ 45,328 Warranty claims incurred (5,296 ) (16,075 ) Provision charged (credited) to expense (770 ) 17,397 Ending balance $ 40,584 $ 46,650 |
Schedule of earnings per share | Schedule of earnings per share Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Net Income / (Loss) $ (697,572 ) $ 17,240 $ (1,206,654 ) $ (55,616 ) Less cumulative dividends earned on Preferred stock (23,505 ) (23,505 ) (69,743 ) (69,743 ) Net loss attributable to common shareholders $ (721,077 ) $ (6,265 ) $ (1,276,397 ) $ (125,359 ) |
Schedule of weighted average diluted shares | Schedule of weighted average diluted shares Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Weighted average common shares outstanding - basic $ 299,212,282 $ 136,311,335 $ 295,592,261 $ 136,311,335 Dilutive effect of stock options – – – – Weighted average common shares outstanding - diluted $ 299,212,282 $ 136,311,335 $ 295,592,261 $ 136,311,335 |
REVENUE (Tables)
REVENUE (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of revenues | Disaggregation of revenues Hospitality Education Multiple Dwelling Units Government Healthcare Total Product Revenue $ 1,441,286 $ 319,115 $ 98 $ 68,455 $ 0 $ 1,828,954 Recurring Revenue 165,540 22,840 0 0 0 188,380 $ 1,606,826 $ 341,955 $ 98 $ 68,455 $ 0 $ 2,017,334 % of Total 80 17 0 3 0 100 The following table presents the Company’s product and recurring revenues disaggregated by industry for the nine months ended September 30, 2022. Hospitality Education Multiple Dwelling Units Government Healthcare Total Product Revenue $ 3,921,615 $ 1,233,998 $ 73,552 $ 341,247 $ 363 $ 5,570,775 Recurring Revenue 460,037 75,597 0 0 0 535,634 $ 4,381,652 $ 1,309,595 $ 73,552 $ 341,247 $ 363 $ 6,106,409 % of Total 72 21 1 6 0 100 The following table presents the Company’s product and recurring revenues disaggregated by industry for the three months ended September 30, 2021. Hospitality Education Multiple Dwelling Units Government Healthcare Total Product Revenue $ 1,195,394 $ 39,577 $ 33,728 $ 21,690 $ 0 $ 1,290,389 Recurring Revenue 96,211 67,468 – – – 163,679 $ 1,291,605 $ 107,045 $ 33,728 $ 21,690 $ 0 $ 1,454,068 % of Total 89 8 2 1 0 100 The following table presents the Company’s product and recurring revenues disaggregated by industry for the nine months ended September 30, 2021. Hospitality Education Multiple Dwelling Units Government Healthcare Total Product Revenue $ 3,463,056 $ 123,975 $ 290,936 $ 144,997 $ 48,195 $ 4,071,159 Recurring Revenue 408,604 97,542 26,461 0 0 532,607 $ 3,871,660 $ 221,517 $ 317,397 $ 144,997 $ 48,195 $ 4,603,766 % of Total 84 5 7 3 1 100 |
Contract Assets and Liabilities | Contract Assets and Liabilities September 30, 2022 December 31, 2021 Contract assets $ 27,579 $ 266,014 Contract liabilities - current 940,056 800,965 |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Receivables [Abstract] | |
Schedule of accounts receivable | Schedule of accounts receivable September 30, 2022 December 31, 2021 Accounts receivable $ 2,001,844 $ 1,016,117 Allowance for doubtful account (62,168 ) (5,563 ) Accounts receivable, net $ 1,939,676 $ 1,010,554 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Inventory Disclosure [Abstract] | |
Schedule of components of inventories | Schedule of components of inventories September 30, 2022 December 31, 2021 Product purchased for resale $ 1,551,676 $ 1,269,056 Inventory - In Transit 235,000 – Inventory - Obsolescence Reserve (378,234 ) (443,497 ) Inventory, net $ 1,408,442 $ 825,559 |
CURRENT ACCRUED LIABILITIES (Ta
CURRENT ACCRUED LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Payables and Accruals [Abstract] | |
Schedule of accrued liabilities and expenses | Schedule of accrued liabilities and expenses September 30, 2022 December 31, 2021 Accrued payroll and payroll taxes $ 244,255 $ 242,131 Accrued inventory in transit 157,263 – Accrued professional fees 118,453 136,584 Accrued sales taxes, penalties and interest 35,087 16,634 Product warranties 40,584 46,650 Other accrued liabilities 302,896 276,722 Total current accrued liabilities $ 898,538 $ 718,721 |
STOCK OPTIONS AND WARRANTS (Tab
STOCK OPTIONS AND WARRANTS (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of options by exercise price | Schedule of options by exercise price Options Outstanding Options Exercisable Exercise Prices Number Outstanding Weighted Average Remaining Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $.01-$0.15 2,000,000 2.38 $ 0.14 2,000,000 $ 0.14 $.16-$0.20 626,847 0.98 $ 0.18 626,847 $ 0.18 2,626,847 2.05 $ 0.16 2,626,847 $ 0.16 |
Schedule of option activity | Schedule of option activity 2022 2021 Number of Shares Weighted Average Exercise Price Value Number of Shares Weighted Average Exercise Price Value Balance Jan 1 3,349,793 $ 0.16 $ 535,967 3,349,793 $ 0.16 $ 535,967 Granted – – – – – – Cancelled, Expired (26,241 ) 0.17 (4,461 ) – – – Exercised – – – – – – Balance March 31 3,323,552 0.16 531,506 3,349,793 0.16 535,967 Granted – – – – – – Cancelled, Expired (541,149 ) 0.16 (86,584 ) – – – Exercised – – – – – – Balance June 30 2,782,403 0.16 444,922 3,349,793 0.16 535,967 Granted – – – – – – Cancelled, Expired (155,556 ) 0.18 (28,000 ) – – – Exercised – – – – – – Balance Sep 30 2,626,847 $ 0.16 $ 416,922 3,349,793 $ 0.16 $ 535,967 |
Schedule of warrants outstanding and exercisable | Schedule of warrants outstanding and exercisable Number of Shares Weighted Price / Share Outstanding at January 1, 2021 250,000 $ 0.16 Granted – – Exercised – – Cancelled or Expired (250,000 ) 0.16 Outstanding at December 31, 2021 – $ – Granted 105,380,666 0.06 Exercised – – Cancelled or Expired – – Outstanding at March 31, 2022 105,380,666 $ 0.06 Granted – – Exercised – – Cancelled or Expired – – Outstanding at June 30, 2022 105,380,666 $ 0.06 Granted – – Exercised – – Cancelled or Expired – – Outstanding at September 30, 2022 105,380,666 $ 0.06 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Components of lease expense | Components of lease expense Three Months Ended Nine Months Ended September 30 September 30 2022 2021 2022 2021 Operating lease cost - fixed $ 49,947 $ 57,387 $ 146,236 $ 172,161 Variable lease cost 25,933 30,213 88,952 91,688 Total operating lease cost $ 75,880 $ 87,600 $ 235,188 $ 263,849 |
Other information related to leases | Other information related to leases September 30, 2022 December 31, 2021 Operating lease liability - current $ 153,276 $ 195,176 Operating lease liability - long term 391,680 459,668 Operating cash flows from operating leases 109,888 242,305 Weighted-average remaining lease term of operating leases 3.2 4.1 Weighted-average discount rate of operating leases 8.5 8.5 |
Future annual minimum operating lease payments | Future annual minimum operating lease payments 2022 (excluding the months already reported upon) $ 47,771 2023 193,169 2024 172,424 2025 158,510 2026 53,185 2027 and thereafter – Total minimum lease payments 625,059 Less imputed interest (80,103 ) Total $ 544,956 |
Schedule of sales tax accrual | Schedule of sales tax accrual September 30, 2022 December 31, 2021 Beginning balance $ 16,634 $ 31,396 Sales tax collected 122,460 85,589 Provisions (reversals) 8,231 (7,685 ) Payments (112,238 ) (92,666 ) Ending balance $ 35,087 $ 16,634 |
BASIS OF PRESENTATION AND SIG_4
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details-Product warranties) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Beginning balance | $ 46,650 | $ 45,328 |
Warranty claims incurred | (5,296) | (16,075) |
Provision charged (credited) to expense | (770) | 17,397 |
Ending balance | $ 40,584 | $ 46,650 |
BASIS OF PRESENTATION AND SIG_5
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details - Anti-Diluted EPS) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||
Net Income / (Loss) | $ (697,572) | $ 8,746 | $ (517,828) | $ 17,240 | $ (155,595) | $ 82,739 | $ (1,206,654) | $ (55,616) |
Less cumulative dividends earned on Preferred stock | (23,505) | (23,505) | (69,743) | (69,743) | ||||
Net loss attributable to common shareholders | $ (721,077) | $ (6,265) | $ (1,276,397) | $ (125,359) |
BASIS OF PRESENTATION AND SIG_6
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details - Diluted EPS) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Weighted average common shares outstanding - basic | 299,212,282 | 136,311,335 | 295,592,261 | 136,311,335 |
Dilutive effect of stock options | ||||
Weighted average common shares outstanding - diluted | 299,212,282 | 136,311,335 | 295,592,261 | 136,311,335 |
BASIS OF PRESENTATION AND SIG_7
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Aug. 06, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Securities Financing Transaction [Line Items] | |||||
Capital contribute | $ 5,000,000 | $ 0 | |||
Advertising expense | $ 0 | $ 2,751 | 3,402 | 5,725 | |
Research and development expenses | $ 272,144 | $ 268,917 | $ 798,913 | $ 876,778 | |
Warrants Outstanding [Member] | |||||
Securities Financing Transaction [Line Items] | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 105,380,666 | 250,000 | |||
Options Outstanding [Member] | |||||
Securities Financing Transaction [Line Items] | |||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 2,626,847 | 3,349,793 | |||
VDA Purchase Agreement [Member] | |||||
Securities Financing Transaction [Line Items] | |||||
Capital contribute | $ 5,000,000 | ||||
Share acquisition | 162,900,947 | ||||
Warrants issued | 105,380,666 |
REVENUE (Details - Disaggregati
REVENUE (Details - Disaggregation of income) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 2,017,334 | $ 1,454,068 | $ 6,106,409 | $ 4,603,766 |
Hospitality [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 1,606,826 | $ 1,291,605 | $ 4,381,652 | $ 3,871,660 |
Hospitality [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Concentration risk | 80% | 89% | 72% | 84% |
Education [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 341,955 | $ 107,045 | $ 1,309,595 | $ 221,517 |
Education [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Concentration risk | 17% | 8% | 21% | 5% |
Multiple Dwelling Units [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 98 | $ 33,728 | $ 73,552 | $ 317,397 |
Multiple Dwelling Units [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Concentration risk | 0% | 2% | 1% | 7% |
Government [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 68,455 | $ 21,690 | $ 341,247 | $ 144,997 |
Government [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Concentration risk | 3% | 1% | 6% | 3% |
Healthcare [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 0 | $ 0 | $ 363 | $ 48,195 |
Healthcare [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Concentration risk | 0% | 0% | 0% | 1% |
All Segments [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Concentration risk | 100% | 100% | 100% | 100% |
Product [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 1,828,954 | $ 1,290,389 | $ 5,570,775 | $ 4,071,159 |
Product [Member] | Hospitality [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 1,441,286 | 1,195,394 | 3,921,615 | 3,463,056 |
Product [Member] | Education [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 319,115 | 39,577 | 1,233,998 | 123,975 |
Product [Member] | Multiple Dwelling Units [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 98 | 33,728 | 73,552 | 290,936 |
Product [Member] | Government [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 68,455 | 21,690 | 341,247 | 144,997 |
Product [Member] | Healthcare [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 0 | 0 | 363 | 48,195 |
Recurring Income [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 188,380 | 163,679 | 535,634 | 532,607 |
Recurring Income [Member] | Hospitality [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 165,540 | 96,211 | 460,037 | 408,604 |
Recurring Income [Member] | Education [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 22,840 | 67,468 | 75,597 | 97,542 |
Recurring Income [Member] | Multiple Dwelling Units [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 0 | 0 | 0 | 26,461 |
Recurring Income [Member] | Government [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 0 | 0 | 0 | 0 |
Recurring Income [Member] | Healthcare [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 0 | $ 0 | $ 0 | $ 0 |
REVENUE (Details - Contract ass
REVENUE (Details - Contract assets and liabilities) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 27,579 | $ 266,014 |
Contract liabilities - current | $ 940,056 | $ 800,965 |
REVENUE (Details Narrative)
REVENUE (Details Narrative) | Sep. 30, 2022 USD ($) |
Revenue from Contract with Customer [Abstract] | |
Revenue, Remaining Performance Obligation, Amount | $ 700,000 |
Revenue, Remaining Performance Obligation, Percentage | 100% |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Receivables [Abstract] | ||
Accounts receivable | $ 2,001,844 | $ 1,016,117 |
Allowance for doubtful account | (62,168) | (5,563) |
Accounts receivable, net | $ 1,939,676 | $ 1,010,554 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Inventory Disclosure [Abstract] | ||
Product purchased for resale | $ 1,551,676 | $ 1,269,056 |
Inventory - In Transit | 235,000 | 0 |
Inventory - Obsolescence Reserve | (378,234) | (443,497) |
Inventory, net | $ 1,408,442 | $ 825,559 |
CURRENT ACCRUED LIABILITIES (De
CURRENT ACCRUED LIABILITIES (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Payables and Accruals [Abstract] | |||
Accrued payroll and payroll taxes | $ 244,255 | $ 242,131 | |
Accrued inventory in transit | 157,263 | 0 | |
Accrued professional fees | 118,453 | 136,584 | |
Accrued sales taxes, penalties and interest | 35,087 | 16,634 | |
Product warranties | 40,584 | 46,650 | $ 45,328 |
Other accrued liabilities | 302,896 | 276,722 | |
Total current accrued liabilities | $ 898,538 | $ 718,721 |
DEBT (Details Narrative)
DEBT (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |||||||
Mar. 10, 2022 | Sep. 15, 2021 | Feb. 16, 2021 | Nov. 06, 2019 | Sep. 30, 2022 | Oct. 09, 2014 | Dec. 31, 2021 | Apr. 17, 2020 | Sep. 30, 2014 | |
Line of Credit Facility [Line Items] | |||||||||
Unrestricted cash | $ 2,000,000 | ||||||||
Line of credit balance | 0 | $ 403,089 | |||||||
Debt and interest forgiven | 1,836,780 | ||||||||
PPP Loan [Member] | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Debt, principal amount | $ 913,063 | ||||||||
Debt forgiveness | $ 913,063 | ||||||||
Accrued interest | $ 7,610 | ||||||||
Second PPP Loan [Member] | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Debt forgiveness | $ 913,063 | ||||||||
Accrued interest | $ 3,044 | ||||||||
Heritage Bank [Member] | Revolving Credit Facility [Member] | |||||||||
Line of Credit Facility [Line Items] | |||||||||
Line of Credit Facility, Maximum Borrowing Capacity | $ 1,000,000 | $ 1,000,000 | $ 2,000,000 | ||||||
Line of credit interest rate description | Prime Rate plus 3.00% | ||||||||
Effective interest rate | 9.25% | 6.25% | |||||||
Warrant issued | 250,000 | ||||||||
Warrant, exercise price | $ 0.20 | ||||||||
Warrant expiry date | Sep. 30, 2019 | Oct. 09, 2021 | |||||||
Line of Credit Facility, Expiration Date | Jun. 30, 2023 | Sep. 30, 2021 | |||||||
Line of credit balance | $ 0 | $ 403,089 | |||||||
Line of credit remaining borrowing capacity | $ 1,000,000 | $ 460,000 |
CAPITAL STOCK (Details Narrativ
CAPITAL STOCK (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | |||
Apr. 08, 2011 | Aug. 04, 2010 | Nov. 16, 2009 | Sep. 30, 2022 | Dec. 31, 2021 | |
Class of Stock [Line Items] | |||||
Conversion price | $ 0.13 | ||||
Purchase warrants | $ 1,628,800 | $ 5,211,542 | |||
Stock per share | $ 0.33 | ||||
Convertible common stock | 13,774 | ||||
Shares issued | 1,075,000 | ||||
Convertible common stock | 38,461 | ||||
Stock Issued During Period, Shares, Conversion of Units | 38,461 | ||||
Preferred shares issued | 486 | ||||
Series A Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Preferred stock, shares authorized | 215 | 215 | 215 | ||
Conversion price | $ 0.363 | ||||
Liquidation preference | $ 1,837,198 | $ 1,822,450 | |||
Unpaid dividends | $ 932,198 | ||||
Series B Preferred Stock [Member] | |||||
Class of Stock [Line Items] | |||||
Preferred stock, shares authorized | 267 | 567 | 567 | ||
Conversion price | $ 0.13 | ||||
Received from sales | $ 1,355,000 | $ 1,335,000 | |||
Liquidation preference | $ 513,179 | $ 497,605 | |||
Unpaid dividends | $ 253,179 |
STOCK OPTIONS AND WARRANTS (Det
STOCK OPTIONS AND WARRANTS (Details - Options by Exercise Price) - Share-Based Payment Arrangement, Option [Member] - $ / shares | 9 Months Ended | |||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Dec. 31, 2020 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||
Options outstanding | 2,626,847 | 2,782,403 | 3,323,552 | 3,349,793 | 3,349,793 | 3,349,793 | 3,349,793 | 3,349,793 |
Options outstanding, weighted average remaining contractual life (Years) | 2 years 18 days | |||||||
Options outstanding, weighted average exercise price | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 |
Options exercisable | 2,626,847 | |||||||
Options exercisable, weighted average exercise price | $ 0.16 | |||||||
Exercise Price 1 [Member] | ||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||
Options outstanding | 2,000,000 | |||||||
Options outstanding, weighted average remaining contractual life (Years) | 2 years 4 months 17 days | |||||||
Options outstanding, weighted average exercise price | $ 0.14 | |||||||
Options exercisable | 2,000,000 | |||||||
Options exercisable, weighted average exercise price | $ 0.14 | |||||||
Exercise Price 2 [Member] | ||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||
Options outstanding | 626,847 | |||||||
Options outstanding, weighted average remaining contractual life (Years) | 11 months 23 days | |||||||
Options outstanding, weighted average exercise price | $ 0.18 | |||||||
Options exercisable | 626,847 | |||||||
Options exercisable, weighted average exercise price | $ 0.18 |
STOCK OPTIONS AND WARRANTS (D_2
STOCK OPTIONS AND WARRANTS (Details - Option Activity) - Share-Based Payment Arrangement, Option [Member] - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||
Options outstanding, beginning balance | 2,782,403 | 3,323,552 | 3,349,793 | 3,349,793 | 3,349,793 | 3,349,793 | 3,349,793 | 3,349,793 |
Weighted average price per share - beginning balance | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 |
Intrinsic value, beginning balance | $ 444,922 | $ 531,506 | $ 535,967 | $ 535,967 | $ 535,967 | $ 535,967 | $ 535,967 | $ 535,967 |
Options granted | 0 | 0 | 0 | 0 | 0 | 0 | ||
Weighted average price per share - granted | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||
Granted | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||
Options cancelled or expired | (155,556) | (541,149) | (26,241) | 0 | 0 | 0 | 0 | 0 |
Weighted average price per share - cancelled or expired | $ 0.18 | $ 0.16 | $ 0.17 | $ 0 | $ 0 | $ 0 | ||
Cancelled or expired | $ (28,000) | $ (86,584) | $ (4,461) | $ 0 | $ 0 | $ 0 | ||
Options cancelled or expired | 155,556 | 541,149 | 26,241 | 0 | 0 | 0 | 0 | 0 |
Cancelled or expired | $ 28,000 | $ 86,584 | $ 4,461 | $ 0 | $ 0 | $ 0 | ||
Options exercised | 0 | 0 | 0 | 0 | 0 | 0 | ||
Weighted average price per share - exercised | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||
Exercised | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | ||
Options outstanding, ending balance | 2,626,847 | 2,782,403 | 3,323,552 | 3,349,793 | 3,349,793 | 3,349,793 | 2,626,847 | 3,349,793 |
Weighted average price per share - ending balance | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 | $ 0.16 |
Intrinsic value, ending balance | $ 416,922 | $ 444,922 | $ 531,506 | $ 535,967 | $ 535,967 | $ 535,967 | $ 416,922 | $ 535,967 |
STOCK OPTIONS AND WARRANTS (D_3
STOCK OPTIONS AND WARRANTS (Details-Warrants Outstanding and Exercisable) - Warrant [Member] - $ / shares | 3 Months Ended | 12 Months Ended | ||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Warrants outstanding, beginning balance | 105,380,666 | 105,380,666 | 0 | 250,000 |
Weighted average price per share - beginning balance | $ 0.06 | $ 0.06 | $ 0 | $ 0.16 |
Warrants granted | 0 | 0 | 105,380,666 | 0 |
Weighted average price per share granted | $ 0 | $ 0 | $ 0.06 | $ 0 |
Warrants exercised | 0 | 0 | 0 | 0 |
Weighted average price per share - exercised | $ 0 | $ 0 | $ 0 | $ 0 |
Warrants cancelled or expired | 0 | 0 | 0 | (250,000) |
Weighted average price per share - cancelled or expired | $ 0 | $ 0 | $ 0 | $ 0.16 |
Warrants cancelled or expired | 0 | 0 | 0 | 250,000 |
Warrants outstanding, ending balance | 105,380,666 | 105,380,666 | 105,380,666 | 0 |
Weighted average price per share - ending balance | $ 0.06 | $ 0.06 | $ 0.06 | $ 0 |
STOCK OPTIONS AND WARRANTS (D_4
STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||
Shares authorized under the plan | 10,000,000 | 10,000,000 | ||||||
Share-Based Payment Arrangement, Noncash Expense | $ 1,815 | $ 1,815 | $ 5,445 | $ 5,446 | ||||
Share-Based Payment Arrangement, Option [Member] | ||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||
Options expired | 155,556 | 541,149 | 26,241 | 0 | 0 | 0 | 0 | 0 |
2020 Plan [Member] | ||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||
Shares available for issuance | 10,000,000 | 10,000,000 |
STOCK ISSUANCE TO NON-EMPLOYE_2
STOCK ISSUANCE TO NON-EMPLOYEE DIRECTORS (Details Narrative) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Non Employee Directors [Member] | ||||
Defined Benefit Plan Disclosure [Line Items] | ||||
Issuance of stock amount | 0 | 0 | 0 | 18,000 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details - Lease expense) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Operating lease cost - fixed | $ 49,947 | $ 57,387 | $ 146,236 | $ 172,161 |
Variable lease cost | 25,933 | 30,213 | 88,952 | 91,688 |
Total operating lease cost | $ 75,880 | $ 87,600 | $ 235,188 | $ 263,849 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details - Other information related to leases) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease liability - current | $ 153,276 | $ 195,176 |
Operating lease liability - long term | 391,680 | 459,668 |
Operating cash outflows from operating leases | $ 109,888 | $ 242,305 |
Weighted average remaining lease term of operating leases | 3 years 2 months 12 days | 4 years 1 month 6 days |
Weighted average discount rate of operating leases | 8.50% | 8.50% |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details - Future lease payments) | Sep. 30, 2022 USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2022 (excluding the months already reported upon) | $ 47,771 |
2023 | 193,169 |
2024 | 172,424 |
2025 | 158,510 |
2026 | 53,185 |
2027 and thereafter | 0 |
Total minimum lease payments | 625,059 |
Less imputed interest | (80,103) |
Total | $ 544,956 |
COMMITMENTS AND CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Details-Sales Tax Accrual) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Balance, Beginning of year | $ 16,634 | $ 31,396 |
Sales tax collected | 122,460 | 85,589 |
Provisions (reversals) | 8,231 | (7,685) |
Payments | (112,238) | (92,666) |
Balance, End of period | $ 35,087 | $ 16,634 |
COMMITMENTS AND CONTINGENCIES_6
COMMITMENTS AND CONTINGENCIES (Details Narrative) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 USD ($) ft² | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) ft² | Sep. 30, 2021 USD ($) | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Rental expenses | $ 75,880 | $ 87,600 | $ 235,188 | $ 263,849 |
Guaranteed bonus | 25,000 | 25,000 | ||
Current liability | 196,724 | 196,724 | ||
Accounts payable | 56,724 | 56,724 | ||
Accrued liabilities | 140,000 | 140,000 | ||
Non-current liability | 255,000 | 255,000 | ||
Mr Gramaglia [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Annual fee | 30,000 | |||
Mr Srouji [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Base Salaries | 300,000 | |||
Guaranteed bonus | $ 20,000 | 20,000 | ||
Mr Sobieskis [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Base Salaries | 211,625 | |||
Mr Mushrushs [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Base Salaries | $ 122,000 | |||
Waukesha Office [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Leased square feet | ft² | 6,362 | 6,362 | ||
Lease expiration date | Apr. 30, 2026 | |||
Waukesha Floor [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Leased square feet | ft² | 5,838 | 5,838 | ||
Gaithersburg [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Leased square feet | ft² | 425 | 425 |
BUSINESS CONCENTRATION (Details
BUSINESS CONCENTRATION (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Concentration Risk [Line Items] | |||
Accounts Payable, Trade, Current | $ 46,000 | $ 134,000 | |
Revenue Benchmark [Member] | Three Customer [Member] | Customer Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration percentage | 36% | ||
Revenue Benchmark [Member] | Two Customer [Member] | Customer Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration percentage | 21% | ||
Accounts Receivable [Member] | Five Customers [Member] | Customer Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration percentage | 64% | ||
Purchases [Member] | Supplier Concentration Risk [Member] | Two Suppliers [Member] | |||
Concentration Risk [Line Items] | |||
Concentration percentage | 95% |